Malaysian citizens above the age of twenty are allowed to buy and own properties. They can buy and own any types of properties except the following:
A property can be leasehold or freehold depending on the type of development. Freehold means you own the structure and the land forever while a leasehold development is developed on the piece of land that is leased, usually 99 years. At the end of the 99 years, the land may be returned to the owner or the lease may be extended. Additional payment to the land owner is required for the extension of the lease.
National Land Code 1965 provides same legal status to either individual title and strata title properties. In the simplest layman terms, strata titles are for multiple buyers sharing one plot of land like apartments, condominiums and gated community where the local council treats as though the land owned by one single owner even though there are many distinct buyers and owners of the properties. This is due to the fact that there are facilities shared by the owners of the properties on the land and it is a master title for the land. For individual titles, the land and the structures belong to the owner(s) indicated on the title deed. Example of properties with individual titles are houses, villas, land or bungalows that are owned by a single owner (or jointly own by a few individuals). There are, of course, many legal differences between strata-title and individual titles but it is beyond the scope of this article.
The process of buying a property is transparent in Malaysia and practically all the documents are in English. You can buy an unlimited number of properties. There are no restrictions on selling (although you may be subjected to Real Property Gains tax and some states may impose a three-year selling ban) and you can do so at your own free will in the free market. You can do bulk purchase (i.e. ten units at one go) or single units. Buyers can participate in auctions.
For low cost or medium cost properties as gazetted by the local state government, restriction applies and they vary from state to state. Generally, the buyer must register with the authorities and must be of a certain income group (lower income). If the demand is more than supply, then balloting may be carried to determine who the buyers are. When it comes selling (in future), there are restrictions as to whom you can sell you and the price of the unit. Please check with the local solicitor or state authorities for the latest updates on purchasing low/medium cost housing.
Financing
Mortgages are available to qualified buyers. Please read up the section on financing. However, for Malaysian, there is an additional program, My First Home Scheme, for first time home buyers. It is only open to first time buyers of residential properties with 100% loan margin. There are many qualifying criteria and it can be found here: http://www.srp.com.my/en/
Malaysia is one of the few countries in the world that allows foreigners to buy many types of properties with the least restrictions. It has the most liberal rules and regulations on buying property with land (i.e. villas, bungalows, semi-detached or terraced houses). There are no special rules and regulations but listed below are some of the general restrictions:
Foreigners must buy properties that are above the minimum purchase price set by the state government. Land is under state jurisdiction and every state has its own rules, procedures and minimum purchase price. Check with the local solicitor on the practice and regulations. Solicitors from other states may not be that conversant with local rules and regulations.
Foreigners can own freehold or leasehold properties and the type of tenure depends on the development and it does not depend on the buyer (foreigners or locals). If the tenure of the development is leasehold, then all buyers, regardless of nationality will buy them as leasehold.
National Land Code 1965 provides same legal status to either individual title and strata title properties. Foreigners owning the properties have the same legal rights and status as locals.
In the simplest layman terms, strata titles are for multiple buyers sharing one plot of land like apartments, condominiums and gated community where the local council treats that land owned by one single owner even though there are many distinct buyers and owners of the properties. For individual titles, the land and the structures belong to the owner(s) indicated on the title deed. Example of properties with individual titles are houses, villas, land or bungalows that are owned by a single owner (or jointly own by a few individuals). There are, of course, many legal differences between strata-title and individual titles but it is beyond the scope of this article.
The process of buying a property is transparent in Malaysia and practically all the documents are in English. There is no need for you to set up a company or marry a local just to buy properties or land in Malaysia. There are no restrictions on the number of years you are allowed to own a property unless the tenure of the development is restricted to leasehold, thus you can own it for as long as you like (a hundred years?) and you can buy an unlimited number of properties. There are no restrictions on selling (although you may be subjected to Real Property Gains tax and some states may impose a three-year selling ban) and you can do so at your own free will in the free market. You can do bulk purchase (i.e. ten units at one go) or single units. Foreigners can participate in auctions and they pay the same legal fees and stamp duty as locals. Financing is also available for foreigners and they own the properties outright (as indicated in the title of the property) and not through a complex system of local companies and proxies. The ownership of the property is legal. There are no capital controls on repatriating profits and gains out of the country.
The only "extra process" for foreigners buying properties in Malayisa, which may take a few months, is getting the "state consent". It is at this stage that the state will vet through the purchase to see if it meets the requirements and guidelines set by the state. In Penang, if the buyer has MM2H visa, the buyer's minimum purchase price is lower at RM500,000 instead of RM1,000,000 (strata-titled) or RM2,000,000 (individual titled). Thus, the approval to buy the property is given at this "state consent" stage.
You may purchase a property from a seller directly or through a property agent. Here are the steps that you need to follow in order to get the purchase through legally and quickly.
You may purchase a residential property from a developer while the property is still under development. The process is slightly different from the process stated above.
Stamp Duty
Stamp duty is payable to the Land Office upon the issuance of the title
Purchase Price | Rate |
---|---|
First RM100,000 | 1.00% |
Next RM400,000 | 2.00% |
Remainder | 3.00% |
Source: http://www.jpph.gov.my/V2/kira_dutisetem.php?versi=1
Legal Fees
Legal fees for the solicitor doing the conveyancing work for the buyer and seller
Purchase Price | Rate |
---|---|
First RM150,000 | 1.0% |
Next RM850,000 | 0.7% |
Next RM2,000,000 | 0.6% |
Next RM2,000,000 | 0.5% |
Next RM2,500,000 | 0.4% |
Where the consideration or adjudicated value is in excess of RM7,500,000 - Negotiable on the excess (but shall not exceed 0.4% of such excess)
Source: http://www.malaysianbar.org.my/others/faqs_for_conveyancing_transactions.html
State Consent / Approval Fee
Penang foreign state consent / approval fee
RM10,000 (individual) or RM20,000 (company) plus 3% approval fee
Source: http://www.penangbar.org/files/2014/cpc-2014-1.pdf
Johor foreign state consent fee
RM20,000 or 2% of the price listed in SPA, whichever is higher
Source: http://ptj.johor.gov.my/images/Pekeliling/ptg%202014-bil%202.pdf (circular, in Malay)
The approval or state consent fee for other states like Selangor, Federal Territories (Kuala Lumpur) and Malacca are negligible (usually less than RM500) and does not add to the cost of property purchase.
Disbursement Fees
Disbursements will include stamp duty on the documents, actual amount spent on search fees (Land Office, Official Assignee, Companies Commission Malaysia, etc), registration fees, travelling expenses, other itemised expenses and miscellaneous expenses.
Source: http://www.malaysianbar.org.my/others/faqs_for_conveyancing_transactions.html
Agency Fees
In Kuala Lumpur / Selangor, the seller has to pay the full agency fees
In Penang, it is split equally between the buyer and the seller. It is also applicable for rental where the real estate agent takes the "disbursement fee" from the tenant/buyer and "agency fee" from the landlord/seller.
Sale and purchase of property, Fees for other services such as joint venture, sale of company, property swaps, etc. – Maximum 3%
Chattels including Plant and Machinery – 10% of the proceeds
Source: http://miea.com.my/faq/estate-agency-fees
http://lppeh.gov.my/WP2016/fees
Mortgages for residential properties are different from commercial or industrial properties loans. The article below describes home financing on residential properties only. Home financing is tightly regulated in Malaysia and thus, the features of the loans are basically almost the same across all banks.
Payment for the property purchased can either be cash or by mortgage through a local bank. Loan origination are from the banks and the banks will hold the loans until it matures. It will be held at the branch of the bank. The banks do not package the loans and sell it to third parties, thus the banks are very careful when it comes to loans and mortgages. They try to minimize bad loans or defaults. The banks will check with Central Credit Reference Information System (CCRIS) before the loan is approved. Any warning signs from CCRIS will weigh heavily on the approval of the mortgage or loans. The decision for a mortgage or a loan depends on many criteria and can be summarized as follows:
Mortgages are "term loans" in which the tenure is set to a maximum of 35 years or until the borrower is 65 years old. Generally, mortgages are taken out on a 30-year period and most banks allow "payment into principal" and this will reduce the tenure of the loans. It is common for people to complete the repayment of the mortgage in ten years.
There is only one type of loan available in Malaysia and that is the standard mortgage where the monthly instalment includes payment to the interest and principal. There is no "interest only" mortgage in Malaysia. Every mortgage is customized, thus, it cannot be compared with other borrowers. You can only compare your own mortgage from different banks.
Here are some points to take note when discussing with the banks on mortgages: